By Lisa Milam-Perez, J.D.
A Vermont statute that requires health insurers and other entities to report payments related to health care claims so that the information can be included in an all-inclusive health care database was preempted by ERISA, the U.S. Supreme Court has ruled in a 6-2 opinion. The duties imposed by the state law are inconsistent with ERISA’s central aim: “to provide a single uniform national scheme for the administration of ERISA plans without interference from laws of the several States even when those laws, to a large extent, impose parallel requirements,” Justice Kennedy wrote for the majority. Consequently, the Vermont law was invalid as applied to ERISA-covered plans (Gobeille v. Liberty Mutual Insurance Co., March 1, 2016, Kennedy, A.).
“All-payer claims” database. The challenged Vermont law requires health insurers (including self-insured plans and third-party administrators), health care providers, government agencies, and other entities to report payments relating to health care claims and other information relating to health care services, including data on enrollment and claims data on members and policyholders, to a state agency so that the information can be compiled in the Vermont Health Care Uniform Reporting and Evaluation System. This database was intended to reflect “all health care utilization, costs, and resources,” both within the state and as to services provided elsewhere to Vermont residents. (The statute’s implementing regulation requires the submission of “medical claims data, pharmacy claims data, member eligibility data, provider data, and other information.”)
The database is meant to serve as a resource “for insurers, employers, providers, purchasers of health care, and State agencies to continuously review health care utilization, expenditures, and performance” in the state. Vermont is one of almost 20 states that currently have, or are in the process of implementing, such an “all-payer claims” database.
Liberty Mutual balks. Liberty Mutual has a self-funded, ERISA-covered health benefit plan that covers some 80,000 individuals in 50 states. The plan covers only 137 Vermont residents, and so falls below the 200-person cutoff for mandated reporting. However, Blue Cross Blue Shield of Massachusetts (BCBS), the plan’s third-party administrator, is a mandated reporter under the disclosure statute, since it serves several thousand residents, including Liberty Mutual plan’s members in Vermont. As such, BCBS was ordered to transmit its files on eligibility, medical claims, and pharmacy claims for the plan’s Vermont members.
Fearing that the disclosure of such confidential information might violate its fiduciary duties, Liberty Mutual instructed BCBS not to comply. It then filed suit seeking a declaration that ERISA preempts application of the Vermont statute and its corresponding regulation to its ERISA-covered plan, and bars the state from pursuing data about the plan or its members. The district court denied the requested relief, and instead granted summary judgment to Vermont. A divided Second Circuit panel reversed, concluding that the state reporting scheme was preempted.
“Impermissible ‘connection with’ ERISA plans.” Vermont’s reporting regime, as applied to ERISA plans, is preempted, the High Court held, as it falls within the category of state laws that interfere with the uniformity of plan administration and thus, has an “impermissible ‘connection with’” ERISA-covered plans. ERISA has “extensive” reporting, disclosure, and recordkeeping requirements in place, the majority noted (including, most importantly, annual reporting requirements to the Secretary of Labor). Consequently, “reporting, disclosure, and recordkeeping are central to, and an essential part of, the uniform system of plan administration contemplated by ERISA.” Indeed, as the Court has previously made clear, these administrative requirements “are integral aspects” of the federal statute. And Vermont’s reporting requirement intrudes upon these “fundamental components of ERISA’s regulation of plan administration.”
“The Secretary of Labor, not the States, is authorized to administer the reporting requirements of plans governed by ERISA,” Kennedy wrote. “Differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability. Preemption is necessary to prevent the States from imposing novel, inconsistent, and burdensome reporting requirements on plans.”
ACA irrelevant. Liberty Mutual also suggested that the new reporting obligations for employer-sponsored health plans imposed by the Affordable Care Act (and incorporated into ERISA) further support a finding of preemption here. However, the ACA specified that it shall not “be construed to preempt any State law that does not prevent the application of the provisions” of the Act. Does this “anti-preemption provision” prevent any new ACA-created reporting obligations from preempting such state reporting regimes, notwithstanding their incorporation into ERISA? This was a question for another day, as the holding here rested on a finding that ERISA’s preexisting reporting and recordkeeping provisions retain their preemptive force regardless of whether the ACA-imposed obligations also preempt state law.
Other arguments unavailing. In defending against the preemption challenge, Vermont argued that Liberty Mutual didn’t show that it actually suffered any additional costs as a result of the Vermont reporting regime. The High Court rejected this rationale, noting it was enough that the company faced the prospect of having to comply with disuniform reporting obligations and the consequent need to satisfy multiple governmental requirements. “A plan need not wait to bring a pre-emption claim until confronted with numerous inconsistent obligations and encumbered with any ensuing costs,” it said. Also unavailing was Vermont’s contention that its statute was not preempted because it served a different objective than ERISA’s purpose, which is to ensure “the financial solvency of plans or the prudent behavior of fiduciaries.” Nor could the Vermont statute be saved by invoking the traditional power of states to regulate public health.
Breyer concurs. Justice Breyer wrote a concurring opinion to emphasize the burdens that would befall self-insured health plans were the High Court not to find preemption here: namely, “[i]f each State is free to go its own way,” plans would have to comply with 50 or more potentially conflicting sets of reporting requirements—an onerous administrative obligation. He also noted that states were not precluded from obtaining the health care utilization information they need from the federal government. Alternatively, “I see no reason why the Secretary of Labor could not develop reporting requirements that satisfy the States’ needs, including some State-specific requirements, as appropriate.”
Thomas concurs. Justice Thomas wrote separately to point out that ERISA contains “what may be the most expansive preemption provision in any federal statute” and to doubt that it amounted to a valid exercise of Congressional authority. He also suggested that the Supreme Court’s current approach to ERISA preemption may be out of sync with its preemption jurisprudence generally.
Ginsburg dissents. In a lengthy dissent joined by Justice Sotomayor, Justice Ginsburg argued that the Vermont data-collection law did not “impermissibly intrude on ERISA’s dominion over employee benefit plans.” She found compelling the argument that the state statute served different interests than ERISA, and that any burden the state reporting requirements might impose on ERISA-covered plans was insufficient to warrant preemption. Moreover, the Vermont law was “a vital part of the State’s control of its own health care market,” she urged; as such, the presumption against preemption applied “full strength,” and Liberty Mutual failed to rebut it.
“Numerous States have informed the Court of their urgent need for information yielded by their health care data-collection laws,” Ginsburg wrote further. As for Justice Breyer’s suggestion that the states get the data they need from the U.S. Department of Labor? It would be “unsettling” for the states to have to rely on the DOL’s graces, she countered—especially where the agency’s data collection function was merely an ancillary one. Such a chore was, in her view, “divorced from ERISA’s objectives.”

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